Most supply chain professionals don’t start their major logistics planning exercises with the question, “How can I minimize the environmental impact of our operations?” But they should, for the simple reason that it makes good business sense.
Today, the best planners are minimizing their company’s carbon footprint and environmental impact by focusing on profitability. By reducing expensive rush shipments, better planning a truck route, or gaining better visibility into the supply chain, they enable “slow, green” shipping decisions – decisions that are green in an environmental as well as a financial sense.
The Bullwhip Effect
Retailers can have the most dramatic green impact throughout the supply chain. They control packaging requirements, favor suppliers with green packaging, and choose products with sustainable ingredients and components. Most importantly, retailers can improve forecasting, dramatically impacting global shipping operations.
Think about the bullwhip effect of forecasting at retail – akin to the metaphor of a butterfly flapping its wings. If a product runs low and a retailer places a rush order for 10 percent more than it needs, there is a natural shockwave throughout the supply chain. The manufacturer decides to add 20 percent to the forecast to be safe, then component manufacturers jump through hoops to build 30 percent more materials for their own buffer.
So the wings flapping at the retail planner’s desk create a tidal wave of unnecessary air freight shipments, ill-advised execution strategies, and short manufacturing runs – all of which tremendously increase the carbon impact throughout the supply chain.
It doesn’t have to be that way. Better inventory visibility and forecasting by retailers mean fewer rush shipments throughout the supply chain to replenish out-of-stocks. With more enhanced awareness of enterprise-wide inventory levels and a flexible approach to fulfilling those orders from other sources, retailers can go green – both environmentally and financially.
That’s why good visibility and analysis software tools are so critical. For instance, they can help identify if too much product is on the West Coast when it will be needed soon on the East Coast. Also, visibility into suppliers’ operations helps retailers to make a more-informed business decision to drop-ship from a supplier to the store or warehouse, or direct to the customer.
Looking at reverse logistics, unsold goods are often pushed back to the DC, a hugely inefficient process. Another option that is often overlooked is to sell those goods from their present location via e-commerce channels, requiring fewer moves.
Retailers should also embrace a demand-based forecast with integrations to POS data to realign the forecast daily and send consistent, clear demand signals upstream to warehouses and suppliers. Better forecasts and more frequent updates to suppliers reduce the bullwhip effect, minimize panic, and thereby allow all parties to make greener decisions.
The Slow Boat…or Truck…or Train
Logistics planners have a different challenge, but one that is just as important to a slow, green approach. They have to consider many modes – boat, rail, truck, fleet vehicles or parcel. That’s why it’s critical to plan optimal loads, evaluate modal choices daily, and creatively find capacity in the most efficient manner possible.
Trains are commonly greener for long-haul shipments, while trucks can be greener for the short haul – which is why it is important to use software tools to crunch the numbers every day and confirm available capacity for those modes. In fact, shipments can travel at greatly reduced rates if they are assigned to a vehicle that is already planned for movement, reducing the carbon impact by not having to create a second trip.
For those companies that own their own fleets, the more freight that is put on each route eliminates the potential need to send additional trucks. TMS solutions can help optimize asset utilization and build safe/legal loads, all without overfilling or crushing goods. This strategic approach helps to reduce the amount of trucks that have to be dispatched.